CVS Health, one of the nation’s largest drugstore chains, announced a major move in their fight against online retailers on Thursday, as they said they are cutting back on total store counts by 900 this year alone.
As of mid-November, the company has announced plans to close 1,600 locations between 2018 and 2020. Out of that figure, 630 CVS Pharmacy locations will be discontinued.
CVS Health currently operates over 8,100 stores across the country, of which 4,700 are CVS Pharmacy stores and 500 are MinuteClinic locations.
The move comes in response to the pressure from large online retailers like Amazon, who are making headway in the pharmacy delivery business. Big-box chains like Walgreens Boots Alliance (which operates more than 7,000 stores) and Rite Aid (which operates over 5,500 stores) have already been forced to shutter down thousands of stores over the past few years, and competitors like Wal-Mart have announced they are ditching the online prescription business entirely.
Add in the fact that CVS Health has been pushed to replace stores by newer companies like Walgreens, and it’s no wonder CVS Health is looking to move away from the traditional retail structure that once made them the driving force in America’s pharmacy world.
“We are in a fast-changing health care environment that requires us to redefine and reshape our approach to growth and capture new growth opportunities,” said David Denton, CVS Health’s CEO, said in a press release. “As we transition to a new commercial and consumer purchasing model, which is moving away from cost as the central selling point and turns to quality and value, CVS Health is evolving with this market.”
In other words, with this new approach, CVS Health no longer expects to achieve maximum profit or profit margins in their business.
“In 2018, we are making the right investments to meet those needs, including a major restructuring of our retail store network,” he added. “By 2020, our estimated retail revenue will be down over 5% as a result of these store closures and new store initiatives.”
What this really means, according to Fortune, is that CVS Health will be able to bolster the profitability of existing stores, as not only will stores be full of more profitable items than they were before, but this restructuring will allow them to offer their merchandise to customers without buying in too heavily to mass market versions of their goods.
CVS Health announced this major store closure initiative on Thursday.
“In exchange for increased store traffic, we now have the flexibility to invest to grow our pharmacy business,” Denton said in a statement. “We look forward to opening 50 new CVS/pharmacy wellness clinics this year, increasing our investment in pharmacy education to help our front-line teammates perform better at improving health outcomes, and continuing to innovate to better serve our customers and members.”
For those who are concerned about losing a store near them, or what this could mean for their neighborhood, Denton says that there will be more stores open during the summer months as many of the closures will occur in areas with high foot traffic during the winter months. There will be no job losses, he said, and anyone who will be impacted by the closures will be given job placement assistance.
In a statement, CVS Health says this will free up resources to focus on creating a more integrated experience across a broader set of retail channels.
Find a CVS pharmacy near you here.